A common trend among consumer protection attorneys is to attempt to stop foreclosures based on the flagrant disregard of by the servicers of the HAMP guidelines that they are bound to follow, either because the loans are owned by Freddie Mac or Fannie Mae, or because they signed Servicer Participation Agreements. Most often, when a homeowner is being reviewed for a HAMP modification, they have not been issued a denial or given the opportunity to contest a denial, and so the bank just goes ahead and forecloses anyway – despite the HAMP’s direct prohibition against this action.
In defense of these litigation suits, however, the attorneys for the servicers are arguing that the HAMP is a contract between the servicer/investor and the US Treasury. As a result, they argue, the homeowner in reality has no rights, as the individual homeowner is not a party to the contract and are not an intended third-party beneficiary to it. To conclude, the banks argue that Freddie Mac is the police authority for any such violations and therefore only Freddie Mac can enforce the HAMP provisions.
In case the Courts decide to side with the banks on this issue (at the time of the publishing of this article many courts in California have taken the side of the banks whereas the Courts on this side of the coast – Massachusetts and D.C. among others – have yet to rule on this matter), I decided to call Freddie Mac and to find out what protocol it has in place to handle such matters. Here is a summary of my call:
I dialed (800) 373-3343 for the HAMP/loss mitigation department, and then sat on hold…for a very…..long time. After 25 minutes on hold, I was directed to “Guness”, who I am fairly certain was not in the Pacific, Mountain, Central or Eastern time zones. I explained to him my situation: I have clients who, despite their best efforts and eligibility for a modification under HAMP, are being screwed by the servicers who improperly attempt to foreclose before a meaningful review under the HAMP guidelines has been completed and/or have failed to provide a written declination, etc. Moreover, the banks are arguing that Freddie Mac, and not the courts, is the sole guardian angel for screwed borrowers to get assistance and stop the foreclosure. So Guness, if you would be so kind, please tell me how they/we enlist your assistance to stop the illegal foreclosures.
Let me summarize Guness’ response:
You/they can call the same number I just did (and wait on hold for 25 minutes)
- Within a specific period of time before the foreclosure that he could not actually disclose to me (I am not sure if it is 1 day before, 3 days before, 2 weeks before, 4 to 8 days before, whatever), then
- They would escalate it to someone else (he could not disclose to whom), and then
- Whomever it was escalated to might do something (but he could not say what). In the case of (1) and (2), when he said he “could not“, he meant he was prohibited from doing so. In the case of (3), “could not” meant he did not have any idea what happened, once it was escalated.
In other words, if you are on the verge of losing your home, Freddie Mac, the guardian of the HAMP program, provides you a toll free number to call. You then have to pray to God you are calling during the applicable period of time (which they will not disclose), and your file may get escalated to the appropriate department. If you are so lucky, then the only people you can talk to have no idea what happens next – hopefully, it stops the foreclosure, but nobody can say for certain. What a fantastic system!
When I continued to question him, insisting that this could not possibly be the correct procedure to ensuring compliance, we were “disconnected.”
Suffice it to say, the next time I am faced with a foreclosure that is proceeding in violation of the HAMP directives, I will both file suit and reach out to Freddie Mac. At least by the time the issue of standing is resolved, the injunction will have prevented the foreclosure. In the meantime, maybe I can figure out when to call and whether Freddie Mac does anything to actually enforce the guidelines it is entrusted to monitor.
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